529 Funding

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Topic Author
Eddiecaps1980
Posts: 44
Joined: Mon Jul 01, 2019 7:58 am

529 Funding

Post by Eddiecaps1980 »

I have one child a year from college and one 5 years away. I have 120k in 529 plans total between the two. The first child will likely go to state school so total (room/board/books) cost per year ~25k. I’ve been finding 1k per month but I think it’s time to rethink that. They are invested in basically 75/25 bonds/stocks.

Personal finances: wife and I contribute max to each 401k with mine doing mega back door (hers not available) and we both do backdoor Roth’s. I don’t have high deductible plan to do a HSA but I do have FSA. The extra savings go to after tax account which I have vanguard world index and some vanguard tax exempt bond fund. No debt other than house at 2.25%.

If I assume my second child college will cost 25k/year then I’m short 80k which I can fund at 1k per month by the time she is in freshman year in college. I can also cash flow it when my second gets into college.

Feels like I should stop the 529(no state benefit) and invest for longer term in after tax account with a longer horizon since I can cash flow college for second. I don’t know if it will make much of a difference but I feel like I should try to put some logic behind it versus just making a change.

Appreciate any perspective on this - thank you.
lazynovice
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Joined: Mon Apr 16, 2012 10:48 pm
Location: Denver area. Former Texan.

Re: 529 Funding

Post by lazynovice »

Is your income low enough that you can cash flow part of the first child’s and then you can claim the AOTC? If so make sure you don’t use 529 for all of her expenses.
TheDDC
Posts: 1604
Joined: Mon Jan 08, 2018 10:11 am

Re: 529 Funding

Post by TheDDC »

We keep kid college money (like all misc savings) in a taxable brokerage account which is invested in all VTSAX. Our state gives us a tax deduction of up to $16,000 per beneficiary per custodian. You don’t know what will happen in life, and college is not a 100% given. Even if they do attend and choose to major in underwater basket weaving that would not be paid for. With a 529 you are locked into one thing to spend it on that is not a guarantee, and then you are penalized 10% to take money out for non-qualified expenses.

I can only see a 529 being useful if college truly is imminent in the next year or so. If you are unsure, you can never go wrong saving, period. I would save in a taxable brokerage.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
Jimsad
Posts: 903
Joined: Mon Mar 20, 2017 5:54 pm

Re: 529 Funding

Post by Jimsad »

TheDDC wrote: Sat Jun 12, 2021 5:17 pm We keep kid college money (like all misc savings) in a taxable brokerage account which is invested in all VTSAX. Our state gives us a tax deduction of up to $16,000 per beneficiary per custodian. You don’t know what will happen in life, and college is not a 100% given. Even if they do attend and choose to major in underwater basket weaving that would not be paid for. With a 529 you are locked into one thing to spend it on that is not a guarantee, and then you are penalized 10% to take money out for non-qualified expenses.

I can only see a 529 being useful if college truly is imminent in the next year or so. If you are unsure, you can never go wrong saving, period. I would save in a taxable brokerage.

-TheDDC
But you do not get tax free growth and be able to withdraw tax free when used for education with taxable brokerage unlike 529
Jimsad
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Joined: Mon Mar 20, 2017 5:54 pm

Re: 529 Funding

Post by Jimsad »

Jimsad wrote: Sat Jun 12, 2021 5:24 pm
TheDDC wrote: Sat Jun 12, 2021 5:17 pm We keep kid college money (like all misc savings) in a taxable brokerage account which is invested in all VTSAX. Our state gives us a tax deduction of up to $16,000 per beneficiary per custodian. You don’t know what will happen in life, and college is not a 100% given. Even if they do attend and choose to major in underwater basket weaving that would not be paid for. With a 529 you are locked into one thing to spend it on that is not a guarantee, and then you are penalized 10% to take money out for non-qualified expenses.

I can only see a 529 being useful if college truly is imminent in the next year or so. If you are unsure, you can never go wrong saving, period. I would save in a taxable brokerage.

-TheDDC
But you do not get tax free growth and be able to withdraw tax free when used for education with taxable brokerage unlike 529
Also if at least one of the parents is college educated, highly likely that the kids will go to college and 529 can now be used for private school too
pattiwack
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Joined: Wed Jan 19, 2011 7:34 pm

Re: 529 Funding

Post by pattiwack »

I have 3. College starts in 2yrs, 3yrs, and 5yrs respectively. We've saved close to 50% of cost for all 3 (for in state) in 529. I'm now thinking of switching gears and just putting the bond/tips portion in the 529 and the stock portion in taxable. Even with that we probably won't get more than 60% of total cost in the 529. But now some will also live out of the 529. In case life happens and not all 3 go/finish. We still will be cash flowing some of the amount.

TBH, had I thought of this approach (FI in 529 / equities in taxable) earlier I probably would have started it a few years ago.
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

Re: 529 Funding

Post by marcopolo »

TheDDC wrote: Sat Jun 12, 2021 5:17 pm We keep kid college money (like all misc savings) in a taxable brokerage account which is invested in all VTSAX. Our state gives us a tax deduction of up to $16,000 per beneficiary per custodian. You don’t know what will happen in life, and college is not a 100% given. Even if they do attend and choose to major in underwater basket weaving that would not be paid for. With a 529 you are locked into one thing to spend it on that is not a guarantee, and then you are penalized 10% to take money out for non-qualified expenses.

I can only see a 529 being useful if college truly is imminent in the next year or so. If you are unsure, you can never go wrong saving, period. I would save in a taxable brokerage.

-TheDDC
There are no gaunatees in life. All we can do is plan for percentages of likely outcomes. It seems pretty easy, based on family income, demographics, family history, to ascertain the rough likelihood of your children going to college. I would think that would be a better way to decide whether or not to save for college education or not.

There is a strong track record in our family of people going to college and most getting advanced degrees. We lived in an upper middle class suburban meghborhood, the school sent something like 94% of graduates on to higher education. Sure, our kids might have chosen a different path, but the odds were pretty highly stacked towards college. I suspect the same is true for many on this forum.

In such cases of overwhelming likelihood, it seems the prudent thing to do is take advantage of the tax free growth rather than pass that up in fear of the small chance of having to pay a little penalty.
Once in a while you get shown the light, in the strangest of places if you look at it right.
TheDDC
Posts: 1604
Joined: Mon Jan 08, 2018 10:11 am

Re: 529 Funding

Post by TheDDC »

marcopolo wrote: Sat Jun 12, 2021 5:46 pm
TheDDC wrote: Sat Jun 12, 2021 5:17 pm We keep kid college money (like all misc savings) in a taxable brokerage account which is invested in all VTSAX. Our state gives us a tax deduction of up to $16,000 per beneficiary per custodian. You don’t know what will happen in life, and college is not a 100% given. Even if they do attend and choose to major in underwater basket weaving that would not be paid for. With a 529 you are locked into one thing to spend it on that is not a guarantee, and then you are penalized 10% to take money out for non-qualified expenses.

I can only see a 529 being useful if college truly is imminent in the next year or so. If you are unsure, you can never go wrong saving, period. I would save in a taxable brokerage.

-TheDDC
There are no gaunatees in life. All we can do is plan for percentages of likely outcomes. It seems pretty easy, based on family income, demographics, family history, to ascertain the rough likelihood of your children going to college. I would think that would be a better way to decide whether or not to save for college education or not.

There is a strong track record in our family of people going to college and most getting advanced degrees. We lived in an upper middle class suburban meghborhood, the school sent something like 94% of graduates on to higher education. Sure, our kids might have chosen a different path, but the odds were pretty highly stacked towards college. I suspect the same is true for many on this forum.

In such cases of overwhelming likelihood, it seems the prudent thing to do is take advantage of the tax free growth rather than pass that up in fear of the small chance of having to pay a little penalty.
The assumption of college is just that - an assumption. And no, college has little to do with your perceived societal status. There are many successful avenues for prosperity these days than college.

College is also overpriced for the value, so the bubble burst is due at some point.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
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Wiggums
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Re: 529 Funding

Post by Wiggums »

Eddiecaps1980 wrote: Sat Jun 12, 2021 5:08 pm I have one child a year from college and one 5 years away. I have 120k in 529 plans total between the two. The first child will likely go to state school so total (room/board/books) cost per year ~25k. I’ve been finding 1k per month but I think it’s time to rethink that. They are invested in basically 75/25 bonds/stocks.

Personal finances: wife and I contribute max to each 401k with mine doing mega back door (hers not available) and we both do backdoor Roth’s. I don’t have high deductible plan to do a HSA but I do have FSA. The extra savings go to after tax account which I have vanguard world index and some vanguard tax exempt bond fund. No debt other than house at 2.25%.

If I assume my second child college will cost 25k/year then I’m short 80k which I can fund at 1k per month by the time she is in freshman year in college. I can also cash flow it when my second gets into college.

Feels like I should stop the 529(no state benefit) and invest for longer term in after tax account with a longer horizon since I can cash flow college for second. I don’t know if it will make much of a difference but I feel like I should try to put some logic behind it versus just making a change.

Appreciate any perspective on this - thank you.
The answer really depends on your saving goal. I.e. do you want to help with more than just college? You don’t want to overfund the 529 since the tax advantage is limited to a subset of college expenses. It would be reasonable to consider a UTMA account for your daughter to invest the remaining college funds. For 2020, the threshold is $2,200. If the unearned income threshold is not exceeded, the Kiddie Tax does not apply. If the threshold is exceeded, only unearned income in excess of the threshold is hit with the Kiddie Tax.
"I started with nothing and I still have most of it left."
Topic Author
Eddiecaps1980
Posts: 44
Joined: Mon Jul 01, 2019 7:58 am

Re: 529 Funding

Post by Eddiecaps1980 »

lazynovice wrote: Sat Jun 12, 2021 5:15 pm Is your income low enough that you can cash flow part of the first child’s and then you can claim the AOTC? If so make sure you don’t use 529 for all of her expenses.
Thanks but no it’s is not.
cabfranc
Posts: 271
Joined: Tue Jun 25, 2019 12:46 pm

Re: 529 Funding

Post by cabfranc »

marcopolo wrote: Sat Jun 12, 2021 5:46 pm
TheDDC wrote: Sat Jun 12, 2021 5:17 pm We keep kid college money (like all misc savings) in a taxable brokerage account which is invested in all VTSAX. Our state gives us a tax deduction of up to $16,000 per beneficiary per custodian. You don’t know what will happen in life, and college is not a 100% given. Even if they do attend and choose to major in underwater basket weaving that would not be paid for. With a 529 you are locked into one thing to spend it on that is not a guarantee, and then you are penalized 10% to take money out for non-qualified expenses.

I can only see a 529 being useful if college truly is imminent in the next year or so. If you are unsure, you can never go wrong saving, period. I would save in a taxable brokerage.

-TheDDC
There are no gaunatees in life. All we can do is plan for percentages of likely outcomes. It seems pretty easy, based on family income, demographics, family history, to ascertain the rough likelihood of your children going to college. I would think that would be a better way to decide whether or not to save for college education or not.

There is a strong track record in our family of people going to college and most getting advanced degrees. We lived in an upper middle class suburban meghborhood, the school sent something like 94% of graduates on to higher education. Sure, our kids might have chosen a different path, but the odds were pretty highly stacked towards college. I suspect the same is true for many on this forum.

In such cases of overwhelming likelihood, it seems the prudent thing to do is take advantage of the tax free growth rather than pass that up in fear of the small chance of having to pay a little penalty.
I agree with this reasoning, but I wonder if when TheDDC speaks of uncertainty, they are referring not to the uncertainty about a child going to college, but rather to the uncertainty about the parents' own life situation, such as unemployment or underemployment, disability, etc. that may make the money earmarked in the 529 needed for other expenses that may change the calculus about whether and how much to pay for college. Personally, we do save in 529s for two children with the goal of paying 100% for in-state tuition and room and board for a four-year degree. Both parents have Ph.D.s To be savings for in-state undergrad is hedging the bet.
Topic Author
Eddiecaps1980
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Joined: Mon Jul 01, 2019 7:58 am

Re: 529 Funding

Post by Eddiecaps1980 »

Thank you all for your perspectives. Definitely appreciate it. I will likely transition the 1k/ month into the other after tax savings.
TheDDC
Posts: 1604
Joined: Mon Jan 08, 2018 10:11 am

Re: 529 Funding

Post by TheDDC »

cabfranc wrote: Sat Jun 12, 2021 7:22 pm I agree with this reasoning, but I wonder if when TheDDC speaks of uncertainty, they are referring not to the uncertainty about a child going to college, but rather to the uncertainty about the parents' own life situation, such as unemployment or underemployment, disability, etc. that may make the money earmarked in the 529 needed for other expenses that may change the calculus about whether and how much to pay for college. Personally, we do save in 529s for two children with the goal of paying 100% for in-state tuition and room and board for a four-year degree. Both parents have Ph.D.s To be savings for in-state undergrad is hedging the bet.
Yes, that’s part of it. The other is the limited nature of what the investment can be spent on and the risk therein. I invest to open possibilities for my family, not follow rules. About the only limited spend investment vehicle I can understand is an HSA because spending on health care is something that has a lot more likelihood in an emergency than spending on college. Compared to health care and even retirement, college is just not a necessity when we look at risk. There IS a risk of going broke not having medical insurance. There IS a risk of not having enough to retire. The worst that happens if you don’t go to college is just that. You don’t go to college.

Okay okay… as long as we’re just going to talk about our wonderful education levels…. I have a MS myself and my wife has a BS. That matters not a whit regarding what works for our kids. We can certainly set boundaries in what will be funded, what majors will be funded, but ultimately it’s up to them. We can help channel interests, etc. We certainly have well paying jobs for people who don’t go to college.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
cmr79
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Re: 529 Funding

Post by cmr79 »

Eddiecaps1980 wrote: Sat Jun 12, 2021 7:26 pm Thank you all for your perspectives. Definitely appreciate it. I will likely transition the 1k/ month into the other after tax savings.
That seems like a reasonable plan with your timeline. Without a state tax benefit and with a college imminently on the horizon, a 529 just doesn't offer many benefits for you.

That contrasts significantly with my own situation. My kids are 12 and 15 years from starting college, so even if I didn't get a state tax incentive (I do), I would still benefit greatly from the tax-free growth in a 529. Given my SES and my/my spouse's educational background and beliefs, the individual chances of each of my children attending college is probably 90-95% and the chances of neither of them attending is likely <1%. I would fully support them doing something else and don't think that college is the only pathway to a successful life by any means; just just making an educated guess based on the available data.
Jimsad
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Re: 529 Funding

Post by Jimsad »

TheDDC wrote: Sat Jun 12, 2021 6:14 pm
marcopolo wrote: Sat Jun 12, 2021 5:46 pm
TheDDC wrote: Sat Jun 12, 2021 5:17 pm We keep kid college money (like all misc savings) in a taxable brokerage account which is invested in all VTSAX. Our state gives us a tax deduction of up to $16,000 per beneficiary per custodian. You don’t know what will happen in life, and college is not a 100% given. Even if they do attend and choose to major in underwater basket weaving that would not be paid for. With a 529 you are locked into one thing to spend it on that is not a guarantee, and then you are penalized 10% to take money out for non-qualified expenses.

I can only see a 529 being useful if college truly is imminent in the next year or so. If you are unsure, you can never go wrong saving, period. I would save in a taxable brokerage.

-TheDDC
There are no gaunatees in life. All we can do is plan for percentages of likely outcomes. It seems pretty easy, based on family income, demographics, family history, to ascertain the rough likelihood of your children going to college. I would think that would be a better way to decide whether or not to save for college education or not.

There is a strong track record in our family of people going to college and most getting advanced degrees. We lived in an upper middle class suburban meghborhood, the school sent something like 94% of graduates on to higher education. Sure, our kids might have chosen a different path, but the odds were pretty highly stacked towards college. I suspect the same is true for many on this forum.

In such cases of overwhelming likelihood, it seems the prudent thing to do is take advantage of the tax free growth rather than pass that up in fear of the small chance of having to pay a little penalty.
The assumption of college is just that - an assumption. And no, college has little to do with your perceived societal status. There are many successful avenues for prosperity these days than college.

College is also overpriced for the value, so the bubble burst is due at some point.

-TheDDC
I am curious . Can you list some the ‘many successful Avenues to prosperity without college ‘?
Is it not true that in general those with college degrees on an average earn more than those who do not?
marcopolo
Posts: 8411
Joined: Sat Dec 03, 2016 9:22 am

Re: 529 Funding

Post by marcopolo »

TheDDC wrote: Sat Jun 12, 2021 6:14 pm
marcopolo wrote: Sat Jun 12, 2021 5:46 pm
TheDDC wrote: Sat Jun 12, 2021 5:17 pm We keep kid college money (like all misc savings) in a taxable brokerage account which is invested in all VTSAX. Our state gives us a tax deduction of up to $16,000 per beneficiary per custodian. You don’t know what will happen in life, and college is not a 100% given. Even if they do attend and choose to major in underwater basket weaving that would not be paid for. With a 529 you are locked into one thing to spend it on that is not a guarantee, and then you are penalized 10% to take money out for non-qualified expenses.

I can only see a 529 being useful if college truly is imminent in the next year or so. If you are unsure, you can never go wrong saving, period. I would save in a taxable brokerage.

-TheDDC
There are no gaunatees in life. All we can do is plan for percentages of likely outcomes. It seems pretty easy, based on family income, demographics, family history, to ascertain the rough likelihood of your children going to college. I would think that would be a better way to decide whether or not to save for college education or not.

There is a strong track record in our family of people going to college and most getting advanced degrees. We lived in an upper middle class suburban meghborhood, the school sent something like 94% of graduates on to higher education. Sure, our kids might have chosen a different path, but the odds were pretty highly stacked towards college. I suspect the same is true for many on this forum.

In such cases of overwhelming likelihood, it seems the prudent thing to do is take advantage of the tax free growth rather than pass that up in fear of the small chance of having to pay a little penalty.
The assumption of college is just that - an assumption. And no, college has little to do with your perceived societal status. There are many successful avenues for prosperity these days than college.

College is also overpriced for the value, so the bubble burst is due at some point.

-TheDDC

1) Well sure, it is an assumption, just like I assumed this morning that I could walk to the beach without getting hit by a car. It is a short walk, there is little traffic, and there is a nice crosswalk. For people in our demographic, the odds of children going to college are not quite that good, but pretty close.

2) Perhaps you misunderstood me, I was not saying that college is required to achieve certain social status, bhut rather that for people in the situation I described, college is a very high probability outcome.

3) While there are indeed other avenues to prosperity, college certainly still improves the odds. Are you aware of the statistics on income levels with and without college degrees? Sure there are exceptions, but again I consider probabilities.


4) I am pretty sure people have been calling the bursting of the college bubble at least as long as they have been callingbthe bursting of the California/Bay Area real estate markets.

If you choose to ignore the probabilities and plan around fear of small probabilities of having to pay a small penalty, that is fine. But, saying that 529 is only useful if college is imminent is poor advice that could cost people a lot of real money.
Once in a while you get shown the light, in the strangest of places if you look at it right.
TheDDC
Posts: 1604
Joined: Mon Jan 08, 2018 10:11 am

Re: 529 Funding

Post by TheDDC »

Jimsad wrote: Sat Jun 12, 2021 8:01 pm I am curious . Can you list some the ‘many successful Avenues to prosperity without college ‘?
Is it not true that in general those with college degrees on an average earn more than those who do not?
You really need examples? The construction trades, automotive/mechanical just to name a few vocational areas. Note that these DO require education, but not college. Then there are pipelines to entrepreneurship… the jobs mentioned above or even something like truck driving for example that can lead quite easily to being your own boss and/or starting a business. How about anyone who has ever worked in a starter job who has worked their way up or starts a business doing something they are passionate about?

Not true at all in 2021 that a college degree implies higher wages. It has much to do with career field and motivation of the individual.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
TheDDC
Posts: 1604
Joined: Mon Jan 08, 2018 10:11 am

Re: 529 Funding

Post by TheDDC »

marcopolo wrote: Sat Jun 12, 2021 8:06 pm 1) Well sure, it is an assumption, just like I assumed this morning that I could walk to the beach without getting hit by a car. It is a short walk, there is little traffic, and there is a nice crosswalk. For people in our demographic, the odds of children going to college are not quite that good, but pretty close.

2) Perhaps you misunderstood me, I was not saying that college is required to achieve certain social status, bhut rather that for people in the situation I described, college is a very high probability outcome.

3) While there are indeed other avenues to prosperity, college certainly still improves the odds. Are you aware of the statistics on income levels with and without college degrees? Sure there are exceptions, but again I consider probabilities.


4) I am pretty sure people have been calling the bursting of the college bubble at least as long as they have been callingbthe bursting of the California/Bay Area real estate markets.

If you choose to ignore the probabilities and plan around fear of small probabilities of having to pay a small penalty, that is fine. But, saying that 529 is only useful if college is imminent is poor advice that could cost people a lot of real money.
There are kids who are “not college material” regardless of SES of parents. High probability of college? Why? Because they have college educated parents? No. That’s a new one to me. Some take an ivory tower view on this, particularly around here. I don’t.

The college bubble… like how many realized in 2020-2021 that it was possible to take college courses via Zoom and don’t wish to pay college tuition and fund brick and mortar palaces and huge salaries to do it?

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
Jimsad
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Joined: Mon Mar 20, 2017 5:54 pm

Re: 529 Funding

Post by Jimsad »

TheDDC wrote: Sat Jun 12, 2021 8:08 pm
Jimsad wrote: Sat Jun 12, 2021 8:01 pm I am curious . Can you list some the ‘many successful Avenues to prosperity without college ‘?
Is it not true that in general those with college degrees on an average earn more than those who do not?
You really need examples? The construction trades, automotive/mechanical just to name a few vocational areas. Note that these DO require education, but not college. Then there are pipelines to entrepreneurship… the jobs mentioned above or even something like truck driving for example that can lead quite easily to being your own boss and/or starting a business. How about anyone who has ever worked in a starter job who has worked their way up or starts a business doing something they are passionate about?

Not true at all in 2021 that a college degree implies higher wages. It has much to do with career field and motivation of the individual.

-TheDD
I would consider vocational schools equivalent to a type of college program
TheDDC
Posts: 1604
Joined: Mon Jan 08, 2018 10:11 am

Re: 529 Funding

Post by TheDDC »

Jimsad wrote: Sat Jun 12, 2021 8:20 pm
TheDDC wrote: Sat Jun 12, 2021 8:08 pm
Jimsad wrote: Sat Jun 12, 2021 8:01 pm I am curious . Can you list some the ‘many successful Avenues to prosperity without college ‘?
Is it not true that in general those with college degrees on an average earn more than those who do not?
You really need examples? The construction trades, automotive/mechanical just to name a few vocational areas. Note that these DO require education, but not college. Then there are pipelines to entrepreneurship… the jobs mentioned above or even something like truck driving for example that can lead quite easily to being your own boss and/or starting a business. How about anyone who has ever worked in a starter job who has worked their way up or starts a business doing something they are passionate about?

Not true at all in 2021 that a college degree implies higher wages. It has much to do with career field and motivation of the individual.

-TheDD
I would consider vocational schools equivalent to a type of college program
Certainly not equivalent in terms of tuition cost or most anything else that a college has in terms of overhead like maintaining facilities, but “OK”. I guess we are in agreement that education as a whole is important to success? So hedge bets… underfund your 529s by a sizable factor. 10% loss on $10,000 is better than 10% on $100,000.

-TheDDC
Rules to wealth building: 75-80% VTSAX piled high and deep, 20-25% VTIAX, 0% given away to banks.
marcopolo
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Joined: Sat Dec 03, 2016 9:22 am

Re: 529 Funding

Post by marcopolo »

TheDDC wrote: Sat Jun 12, 2021 8:12 pm
marcopolo wrote: Sat Jun 12, 2021 8:06 pm 1) Well sure, it is an assumption, just like I assumed this morning that I could walk to the beach without getting hit by a car. It is a short walk, there is little traffic, and there is a nice crosswalk. For people in our demographic, the odds of children going to college are not quite that good, but pretty close.

2) Perhaps you misunderstood me, I was not saying that college is required to achieve certain social status, bhut rather that for people in the situation I described, college is a very high probability outcome.

3) While there are indeed other avenues to prosperity, college certainly still improves the odds. Are you aware of the statistics on income levels with and without college degrees? Sure there are exceptions, but again I consider probabilities.


4) I am pretty sure people have been calling the bursting of the college bubble at least as long as they have been callingbthe bursting of the California/Bay Area real estate markets.

If you choose to ignore the probabilities and plan around fear of small probabilities of having to pay a small penalty, that is fine. But, saying that 529 is only useful if college is imminent is poor advice that could cost people a lot of real money.
There are kids who are “not college material” regardless of SES of parents. High probability of college? Why? Because they have college educated parents? No. That’s a new one to me. Some take an ivory tower view on this, particularly around here. I don’t.

The college bubble… like how many realized in 2020-2021 that it was possible to take college courses via Zoom and don’t wish to pay college tuition and fund brick and mortar palaces and huge salaries to do it?

-TheDDC

Really? You are surprised that parent's education level might have an impact on a childs college attainment?!?

Perhaps you could "educate" yourself on the issue.

Here is one place to start:

https://nces.ed.gov/pubsearch/pubsinf ... id=2018421

or you could just Google something like "correlation between parents education level and college attendance".
Once in a while you get shown the light, in the strangest of places if you look at it right.
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SmileyFace
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Re: 529 Funding

Post by SmileyFace »

TheDDC wrote: Sat Jun 12, 2021 8:22 pm
Jimsad wrote: Sat Jun 12, 2021 8:20 pm
TheDDC wrote: Sat Jun 12, 2021 8:08 pm
Jimsad wrote: Sat Jun 12, 2021 8:01 pm I am curious . Can you list some the ‘many successful Avenues to prosperity without college ‘?
Is it not true that in general those with college degrees on an average earn more than those who do not?
You really need examples? The construction trades, automotive/mechanical just to name a few vocational areas. Note that these DO require education, but not college. Then there are pipelines to entrepreneurship… the jobs mentioned above or even something like truck driving for example that can lead quite easily to being your own boss and/or starting a business. How about anyone who has ever worked in a starter job who has worked their way up or starts a business doing something they are passionate about?

Not true at all in 2021 that a college degree implies higher wages. It has much to do with career field and motivation of the individual.

-TheDD
I would consider vocational schools equivalent to a type of college program
Certainly not equivalent in terms of tuition cost or most anything else that a college has in terms of overhead like maintaining facilities, but “OK”. I guess we are in agreement that education as a whole is important to success? So hedge bets… underfund your 529s by a sizable factor. 10% loss on $10,000 is better than 10% on $100,000.

-TheDDC
The 10% penalty is on EARNINGS ONLY. You have the choice of going taxable and paying taxes on all gains (which will be guaranteed) or going 529 and paying zero taxes on all gains if used for college - or a small penalty on gains if not. I decided there was a high probability my kids would want an educatiin and used 529s - saved me many thousands in taxes - 20+ years of tax free gains. For most of us its a great deal.
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SmileyFace
Posts: 9080
Joined: Wed Feb 19, 2014 9:11 am

Re: 529 Funding

Post by SmileyFace »

OP: I would continue to use 529s. Interestingly Bogleheads will have 20 page threads on banks that pay an extra 0.01% or so in interest but then argue against using a 529 if you only have 5 years left for college thinking it not worth it seemingly overlooking the fact your effective interest rate therein will be so much higher since it will be tax free.
HopeToGolf
Posts: 410
Joined: Fri Dec 24, 2010 3:04 pm

Re: 529 Funding

Post by HopeToGolf »

Eddiecaps1980 wrote: Sat Jun 12, 2021 7:26 pm Thank you all for your perspectives. Definitely appreciate it. I will likely transition the 1k/ month into the other after tax savings.
We have done the same. With my offspring about 3 years away from starting college, we stopped the contributions to the 529. Without a state tax deduction, the benefit of the plan for us is tax free growth. With such little time before the withdrawals start, theoretically, I should invest the funds in conservative vehicles which should, theoretically, yield low growth and, thusly, little benefit from the 529. Since I have decided to keep the existing balance in far riskier investments than I should, I decided a balance to that was to stop contributions. The other factor is the account is currently overfunded for in-state public school (underfunded for private school). I plan to cash flow anything not covered by the 529 so I figured I may as well just add what I was contributing to the rest of my savings. The other thing I decided to do was to take an annual $10K withdrawal to cover a portion of private high school tuition as a way to balance some of the risk from the aggressive asset allocation and overfunding just in case public school is in play.
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